Question

1. opportunity cost is the value of the:

○ best alternative which is given up when a decision is made.
○ alternative that is selected when a decision is made.
○ alternative that is selected and the next best alternative.
○ worst alternative available to the decision maker.

Explanation:

To determine the correct answer, we recall the definition of opportunity cost. Opportunity cost refers to what is forgone when a choice is made, specifically the value of the best alternative that is not chosen (given up) as a result of making a decision.

• The second option describes the chosen alternative, not the opportunity cost.
• The third option incorrectly combines the chosen and the next - best alternative, but opportunity cost is just the value of the forgone best alternative.
• The fourth option is incorrect as opportunity cost is about the best forgone alternative, not the worst one.
• The first option matches the definition of opportunity cost.

Answer:

A. best alternative which is given up when a decision is made.